The Sign Businesses For Sale Blog
What is EBITDA and Why is it Relevant to You?
If you’ve heard the term EBITDA thrown around and not truly understood what it means, now is the time to take a closer look, as it can be used to determine the value of your business. That stated, there are some issues that one has to keep in mind while using this revenue calculation. Here is a closer look at the EBITDA and how best to proceed in using it.
EBITDA is an acronym for earnings before interest, taxes, depreciation and amortization. It can be used to compare the financial strength of two different companies. That stated, many people don’t feel that EBITDA should be given the importance that is frequently attributed to it.
Divided Opinion on EBITDA
If there is disagreement on EBITDA being able to determine the value of a business, then why is it used so often? This calculation’s somewhat ubiquitous nature is due, in part, to the fact that EBITDA takes a very complicated subject, determining and comparing the value of businesses, and distills it down to an easy to understand and implement formula. This formula is intended to generate a single number.
EBITDA Ignores Many Key Factors
One of the key concerns when using or considering a EBITDA number is that it is often used as something of a substitute for cash flow, which, of course, can make it dangerous. It is vital to remember that earnings and cash earnings are not necessarily one in the same.
Adding to the potential confusion is the fact that EBITDA does not factor in interest, taxes, depreciation or amortization. In short, a lot of vital information is ignored.
Achieving Optimal Results
In the end, you simply don’t want to place too much importance or emphasis on EBITDA when determining the strength of a business. The calculation overlooks too many factors that could influence future growth and prosperity of a business.
Business brokers have been trained to handle valuations to determine the approximate value of a business. Since valuations take many more factors into consideration, they also tend to be far more accurate.
Five Reasons Business Brokers Improve Closing Rates
It has long been a well-known fact that business brokers can help improve closing rates. In this article, we will take a closer look at the five top reasons why having a business broker on your side can make all the difference in the world.
#1 – They Reach the Most Buyers
What seller isn’t looking to reach more buyers? When more candidates are reviewing your business, the odds of selling for your desired price only go up. The simple fact is that business brokers reach the most buyers. In fact, they usually have a long list of prospective buyers waiting.
#2 – Business Brokers Know How to Navigate Negotiation Hurdles
As the old saying states, “there is no replacement for experience,” and this definitely holds true for business brokers. Business brokers know what it takes to circumvent negotiation hurdles. Their years of hands on experience means they can spot problems long before they occur, and this dramatically helps them to successfully boost closing rates.
#3 – They Know How to Present Your Business
Once again, experience matters. Business brokers specialize in buying and selling, and this means that they understand how to best present those businesses. Showcasing your business in the best light possible and working to eliminate weaknesses in presentation is a vital part of the sales process. Business brokers put their experience to work helping sellers achieve the best presentation possible.
#4 – They Stay Focused
Business brokers sell businesses for a living. You, however, by contrast have to worry about the day to day state of your business until all the paperwork is signed.
Additionally, since you are unfamiliar with the process of selling a business, you very well may become bogged down in the process; this is more dangerous than it may seem. Sellers who spend too much time getting involved in the “ins and outs” of the deal may accidentally start to neglect their own business operations. The last thing you want in the time period leading up to a sale is for your business to suddenly flounder.
#5 – Business Brokers Are Highly Invested in Your Success
Business brokers only get paid if your business sells. That means they too have a vested interest in your success. You can expect them to do everything possible to ensure that the sale of your business goes through.
Added together, these five factors help to explain why business brokers have historically enjoyed high closing rates. If you want to improve your chances of selling a business, don’t try to do it alone.
5 Tips for Buyers of International Businesses
The decision to buy an international business is no doubt quite serious. There are numerous factors that must be taken into consideration when deciding whether or not an international business purchase is the right move. Let’s take a closer look.
Tip #1 – Relocating Vs. Hiring a Manager
Buying an international business can also mean a substantial life change. Before jumping into the process, it is critical that you know whether you will be relocating or hiring a manager to run your newly acquired business.
Obviously, owning a business is a substantial responsibility and you’ll want to ensure that you know exactly what is going on with your new acquisition. Sometimes that means actually being there. The bottom line is that you will either have to relocate or hire a manager.
Tip #2 – Regulations
Understanding regulations, taxes and customs are another must for buyers of international businesses. A failure to factor in these elements can literally undo one’s business or at the very least place you at a competitive disadvantage. The time and money you invest in learning how regulations, taxes and customs work in this new territory is time and money well spent.
Tip #3 – Research Similar Businesses
You will want to invest your time into research. In particular, you will want to research similar businesses that already exist in the place where you are investing. Why are those businesses successful? What could you do to improve on their model or approach? Don’t assume that just because you know how businesses fare in the United States that this knowledge will always translate over to other countries.
Tip #4 – Be Aware of Potential Cultural Differences
It is important to be aware of cultural differences during the negotiation process, but this is really just the beginning. Cultural differences do not end once the negotiation process is over. They have ramifications in areas including everything from dealing with your staff and vendors to getting professional assistance from people such as local accountants and lawyers. You will need to be aware of cultural differences and perhaps even learn to speak the language if you want your business to be a thriving success.
Tip #5 – Hire a Business Broker
Business brokers are experts in buying and selling all kinds of businesses and that includes international businesses. There are many layers to owning an international business and business brokers can help you navigate the waters. The sizable expertise that a business broker brings to the table can help save you considerable amount of frustration and confusion.
These five tips are invaluable for helping you determine whether you should opt for an international business and/or how to proceed once you’ve decided to move forward. There can be big opportunities in owning an international business, but it is critical to proceed with a clear cut strategy.